This is from a press release embargoed until 00:01 today (it says). I don’t know why, there’s nothing new here, because Nordhaus said the same thing well over a year ago in this Guardian article where he says “taxation is a proven instrument”. Um, well no, it hasn’t been proven with carbon emissions yet perfessor. This fellow’s view rather reminds me of the view of Leona Helmsley, who famously said: “We don’t pay taxes. Only the little people pay taxes…,”
Carbon taxes are the answer to the stalled climate negotiations
London, UK (January 6, 2011) – For global warming policy, the 2009 United Nations Climate Change Conference (Copenhagen Summit) was a major disappointment. Designed to negotiate a successor to the Kyoto Protocol, which expires in 2012, the Summit concluded without a binding agreement because of deep divisions on the distribution of emissions reductions and costs. In addition, the United States failed to take action on a carbon cap-and-trade bill in 2010. Confronting this policy vacuum, leading climate economist William Nordhaus argues in the Bulletin of Atomic Scientists, published today, that carbon taxes are the best approach to achieve significant emissions reductions.
William Nordhaus argues that the cap-and-trade approach used in the 1997 Kyoto Protocol will not accomplish the goals of slowing climate change. As currently designed, it is both economically inefficient and ineffective and should be supplemented or replaced. Additionally, a carbon tax could be a useful means to cut budget deficits while meeting environmental objectives.
Emissions of carbon dioxide are externalities – social consequences not accounted for in the market place. They are market failures because people do not pay for the current and future costs of their emissions.
“If economics provides a single bottom line for policy, it is that we need to correct this market failure by ensuring that all people, everywhere, and for the indefinite future, face a market price for the use of carbon that reflects the social costs of their activities,” Nordhaus states.
He says that it is necessary to raise the price of carbon to implement carbon policies so that they will have an impact on everyday human decisions, and on decision makers at every level in every nation and sector. At present, incentives and levels of involvement vary, and where some countries have implemented strong emission control measures, they only cover a limited part of national emissions. For example, the European Trading Scheme – Europe’s effort to initiate a cap-and-trade structure – covers only about half of EU emissions.
Economic evidence suggests the cost of this limited participation is high. Participation will have to involve everyone by the mid 21st century if the aim of keeping global temperature change within the 2 degrees Celsius target of the Copenhagen Accord is to be achieved.
Given a choice between a cap-and-trade system (such as is embodied in the Kyoto model), and a carbon tax system (such as is used for limiting gasoline or cigarette consumption), Nordhaus favours taxation: “Countries have used taxes for centuries,” he says. “By contrast, there is no experience – as in zero – with international cap-and-trade systems.”
A carbon-tax model also provides a friendly way for countries to join a climate treaty. Countries considering joining under the current Kyoto model have to weigh up concerns about the long-term impacts of climate change with heavy pressures that big countries could apply. Under the carbon-tax model, by contrast, countries would need only to guarantee that their domestic carbon price would be at least at the level of the international norm – a relatively straightforward and transparent choice.
How do we modify the Kyoto Protocol to include tax-type models? Some have suggested a hybrid approach combining both quantity and price approaches. An example of a hybrid plan would be a traditional cap-and-trade system combined with a floor carbon tax and a safety-valve price. The Kyoto treaty might also be broadened, to allow countries to fulfill their treaty obligations if they have a domestic regime with a minimum carbon price attached to all emissions.
One further impetus for climate-tax legislation comes from the need to curb the growing budget deficits in many high-income countries. A carbon tax would provide an important revenue source, and a carbon tax is the closest thing to an ideal tax that can be imagined, he argues.
“The international community should move quickly to replace the current cap-and-trade structure by one in which the central economic mechanism is a tax on greenhouse-gas emissions,” Nordhaus concludes.
This title is embargoed until 00:01hrs GMT January 6th, 2011 for a copy please contact: jayne.fairley@sagepub.co.uk
William Nordhaus is a Sterling Professor of Economics at Yale University, CT. He has served on several committees of the U.S. National Academy of Sciences (NAS), including the Committee on Nuclear and Alternative Energy Systems, the Panel on Policy Implications of Greenhouse Warming, and the Committee on Implications for Science and Society of Abrupt Climate Change.
Author contact information: william.nordhaus@yale.edu
Tel: 001 203 432 3598
The architecture of climate economics: Designing a global agreement on global warming by William D. Nordhaus is published today (6 January, 2011) in the Bulletin of the Atomic Scientists Volume 67, issue 1. The article will be free to access for a limited period from http://bos.sagepub.com. The Bulletin of the Atomic Scientists is published by SAGE.
The Bulletin of the Atomic Scientists
The Bulletin is an independent nonprofit 501 (c) (3) organization that publishes analysis and conducts forums about nuclear security, climate stabilization, and safety in the biosciences. Founded by Manhattan Project scientists from the University of Chicago, it links the work of scholars and experts with policymaking entities and citizens around the world. An international network of authors assesses scientific advancements that involve both benefits and risks to humanity, with the goal of influencing public policy to protect the Earth and its inhabitants. The organization’s scientific advisory boards include 19 Nobel laureates, ambassadors, leading scholars, distinguished NGO officials, and public policy experts. The Bulletin is closely followed in Washington and other world capitals and uses its iconic Doomsday Clock to draw international attention to global risks and solutions.
SAGE is a leading international publisher of journals, books, and electronic media for academic, educational, and professional markets. Since 1965, SAGE has helped inform and educate a global community of scholars, practitioners, researchers, and students spanning a wide range of subject areas including business, humanities, social sciences, and science, technology, and medicine. An independent company, SAGE has principal offices in Los Angeles, London, New Delhi, Singapore and Washington DC. www.sagepublications.com
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No, a carbon tax will not be any more effective than the cap-and-trade approach. China, India, and most third-world countries will never agree to pay a carbon tax. So the effect of a carbon tax on the rest of the world would be to simply move carbon output and jobs to those countries who refuse to pay the tax. No net CO2 reductions would result. But it would succeed in redistributing the wealth, which is what a lot of activists really want to achieve in the first place. Just don’t be deceived into thinking that a carbon tax would be effective in reducing global warming gasses.
Anthony,
Your mention of Leona Helmsley seems especially appropriate.
As any kid who’s participated in high school or college debate
knows, a straight across-the-board tax on goods or services
is inherently regressive in nature.
This means the “little” people with their “little” incomes
pay a higher percentage of their income to government
by way of the tax to aquire or use the same goods and
services as the well-to-do “big” people.
A special “tax” interposes more layers of govenment
that have to be fed (via that same tax) and slips more
govenment control into the supply/demand formula
that produces “fair market values”.
It sounds like a sneaky way for governments to control
key industries by limiting consumption within a society
without calling it socialism.
If the science behind the 2C goal is dubious, the politics
hidden behind the curtain of the Nordhaus plan is
a swindle.
R.S.Brown,
The 2C is not a goal, it is just a wish, since there is no plan to achieve it. There is not even an identified set of conditions which must be achieved to assure that 2C is not exceeded.
“A goal without a plan is just a wish.”, Antoine de St. Exupery
I challenge you to identify the single, specific, clearly defined and enunciated GOAL of the AGW “consensed”.
The ‘reshiftables’ debate is hotting up down under-
http://www.theaustralian.com.au/national-affairs/power-blame-game-heats-up/story-fn59niix-1225944430917
As an economist, Professor Nordhaus should consider the costs as well as the benefits of such a policy. It will be most effective if implemented in the poor but growing economies like China & India, by denying hundreds of millions of people the aspiration of cars, refigerators, heating and air conditioning. It will reduce the spectacular economic growth in these countries.
In the rich west, it can only work by reducing living standards, with the poor hit hardest. Moreover it is ineffective for reducing energy consumption – as a tripling of the world oil price in the past decade has been ineffective.
I explain more on my blog at http://manicbeancounter.wordpress.com/2011/01/06/prof-nordhaus-forgets-some-basic-economics/
Giving the clowns in D.C. any king of extra revenue to work with is just a recipe for an accelerated race toward complete disaster. History has clearly demonstrated that for every dollar of extra revenue they get their hands on, they will find ways to spend a buck and a half. In Reagan’s first term federal tax revenues were about $650 billion and spending was over $700 billion. Now after three decades of caterwauling about tax cuts for the rich, revenues have more than tripled to $2.1 TRILLION but spending has increased more than 5X. And BTW the percent of revenue paid by the upper percentiles of taxpayers has been increasing not declining.
Since most people have a hard time wrapping their head around large numbers I looked up this old illustration
http://www.pagetutor.com/trillion/usdebt.html
I say old, but it is actually from less than two years ago, March 2009. The national debt it shows was than $11 trillion. Today, less than 2 yrs later the number has gone past $14 trillion, an almost 30% increase. You’ll have to mentally insert another six levels of pallets filled with hundred dollar bills to the above image to bring it up to date.
“Sustainability” has been a persistent meme of the ecofascists and, in a way, I have always sort of agreed with them that we are on an unsustainable path. But, in my view, what is making our society unsustainable has nothing to do with fossil fuels, commodities, food, rainforests, polar bears, pacific smelt, etc. but it is encapsulated quite clearly in the image I linked above.
In reply to Mustafa January 6, 2011 at 10:58 am
Granted that Prof Nordhaus was one of the few to challange the Stern Review and others. An achievement was to cost up the Stern Review proposals versus Al Gore’s.
However, having read this current paper the Professor fails on economic grounds. Any policy will impose economic costs, yet will not completely eliminate global warming (per IPCC view). The AGW consensus also says that warming will happen and have very costly consequences. There is meant to be a least cost case of maintaining temperature increase to 2 celsius (CO2 levels circa 600ppm).
Nordhaus largely ignores
1. The whole policy is in vain if China is not on board. And China is not. Without it Europe can reduce their CO2 by 80% and make virtually no differance. See http://rogerpielkejr.blogspot.com/2010/08/recent-talk-of-mine.html
2. A Carbon Tax is ineffective. If it was then fossil fuel use would have fallen already with oil prices having more than tripled in the last decade.
3. A carbon tax hits the poor hardest.
So even if you believe that global temperatures will climb 3 degrees in a generation, that famine will break out as harvests fails, than there will be droughts and floods at the same time, that we will freeze in winter and roast in summer, that hurricanes will become more extreme, the Himalayan glaciers vanish and the Amazon rainforests perish- even if you believe all that, a policy that is ineffective, reduces living standards and is highly regressive, may just make the situation worse. That is why you need to take a more balanced approached to policy.
I examine Nordhaus’s paper more at http://manicbeancounter.wordpress.com/2011/01/06/prof-nordhaus-forgets-some-basic-economics/
Per Strandberg says:
Professor Nordhaus is a member of Skull & Bones a famous secret society of Yale University with a rather notorious reputation.
Ah, well. That’s all we really need to know. I’m sure Nordhaus is well aware his ideas are complete BS.
William Naudhouse,
In a few simple words, will you please explain how the collected taxes will be spent in a way that reduces GHG emissions?
Can you please cite a study that lists such ways to spens, with estimates of GHG savings for each?
(The most effective, about the only one that I can imagine to be significant, is moew widesperad adoption of nuclear power, which is already well under way).
You might like to condiser an alternative economic approach – first, that people are by nature energy-conservative; they do not want to pay excess monies for energy when they could spend it on fun. Second, each person will consume a minimum, quantifiable amount of energy in a lifetime; and third, that attempts to substantially reduce that consumption will cause death.
The ultimate market failure is when the government induces poverty through taxation to combat a nonproblem.
Ed Reid says:
January 6, 2011 at 2:42 pm (Edit)
R.S.Brown,
The 2C is not a goal, it is just a wish, since there is no plan to achieve it. …
I challenge you to identify the single, specific, clearly defined and enunciated GOAL of the AGW “consensed”.
The early death of several billion innocent people, and the forced sterilization of the surviving few so that pristine “nature” may again reign pure and supreme in all her glory on this earth without man present to pollute and despoil her surface?